Expert Highlights Factors Stifling Stock Market Growth

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Policy implementation slowdown, sell-offs by foreign investors and the outcome of the 2019 elections are some factors affecting the growth of the stock market this first-half (H1) of the year, the Chief Economist and Advisory Partner at Pricewaterhouse Coopers (PWC), Andrew Nevin, has said.

A report quoted Nevin, to have said this in Lagos, during a breakfast meeting of Association of Corporate Treasurers of Nigeria (ACTN).

The breakfast meeting with the theme: “2019 Economic and Business Outlook,” was supported by FMDQ OTC Securities Exchange.

“Overall, key drivers for the market from H1’2019 include: commodity prices, exchange rate movement and stability; and inflation rate.

“In 2018 we predicted a moderate increase in foreign portfolio investment (FPI) and a slowdown in by first-half of 2018, driven by uncertainty ahead of the elections. We expect FPI growth in first-half 2019 to remain low and lower than pre-2018 level,” the chief economist said.

He added: “We expect FDI flows to be dampened by lacklustre implementation of policy reforms.”

He identified key risks to foreign investment in Nigeria to include: interest rate differentials as advanced economies continue to tighten policy rates and broad macroeconomic instability.

Global FDI flows fell by 19 percent in 2018. However, 2018 FDI flows to Africa increased by six per cent, from $38 billion to $40billion.

South Africa grew by 446 per cent; Egypt seven per cent. But in Nigeria it fell by 36 per cent, to $2.2 billion and was overtaken by Ghana with $3.3billion.

Speaking further, Nevin noted that Nigeria is not among the fastest growing economies in Sub-Saharan Africa (SSA) by percentage growth in GDP.

“The largest economies in Sub-Saharan Africa offer opportunities for business growth, particularly when considering an expansion into new regions,” he added.

According to PwC, diaspora remittances remain a major support to Nigerian economy, adding that Nigerians in diaspora sent an estimated $25billion in remittances to the country in 2018, representing 6.1percent of the nation’s GDP.

“This figure translates to 83 per cent of the federal government budget in 2018 and 11 times the Foreign Direct Investment flows in the same period. Nigeria’s migrant remittance inflows was also seven times larger than the net official development assistance (foreign aid) received in 2017 of $3.359 billion,” he noted.

Leading countries worldwide by value of migrant remittance outflows comprise the United States, Switzerland, Germany, Russia and China.  

Nigeria, according to the chief economist at PwC is not among the fastest growing economies in Sub-Saharan Africa (SSA) by percentage growth in GDP.

“The largest economies in Sub-Saharan Africa offer opportunities for business growth, particularly when considering an expansion into new regions.

“Fluctuating prices leave Nigeria’s oil-driven economy vulnerable to external shocks.  The oil production curve continues to slope downward and below the 2 million barrels per day (mbpd) average target set by the central government.

“OPEC has lowered Nigeria’s oil production level to 1.685mbpd. We expect this cut coupled with fluctuations in oil price and potential supply disruptions to impact the 2019 budget implementation”, Nevin further stated.

In his remark, the MD/CEO of Graeme Blaque Advisory who is also the Chairman Interim Council, Association of Corporate Treasurers of Nigeria, Zeal Akaraiwe, said the association fosters the interests of corporate treasurers in the country by providing a platform for policy advocacy, discussions on issues of mutual interest, education and standard development of the corporate treasury function.